Heads Up! Busy 2 Weeks in Regs, Reports, Bills

January 18, 2011


By Linda Koco
Contributing Editor
Jan. 18, 2011 -- This week and next promise to bring federal legislative and regulatory news of keen interest to insurance and allied professionals. Here is a brief rundown of some developments that are likely to occur, plus a few that are widely expected to occur but may carry over into February.

Tuesday, Jan. 18: The Securities and Exchange Commission (SEC) is expected to submit a report to Congress about whether there should be legislation to enable the SEC to designate self-regulatory organizations for investment advisers. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010 says this report is due on January 17, but since that is a holiday, observers expect to see it on Tuesday instead.

Note: Dodd-Frank requires that mid-sized advisers, with $25 million to $100 million in assets under management, be registered with one or more state securities authorities. It says bigger advisors, with more than $100 million in AUM, must register with the SEC. That will require many smaller advisors to switch from SEC registration to state registration. (In November, the SEC issued proposed rules concerning this.)

Importance for insurance professionals: The recommendations in the SEC report to Congress could impact oversight of independent registered investment advisers (RIAs). That would be of interest to securities-licensed insurance specialists who have become RIAs. It might also have indirect business process impact on insurance professionals who do business with RIAs.

Wednesday, Jan. 19: The U.S. House of Representatives may bring H.R.2 to a vote, according to news reports. This bill -- the Repealing the Job-Killing Health-Care Law Act – is proposing to repeal the Affordable Care Act (ACA) of 2010. It was originally set for a vote in the second week of January, but that was postponed.

Importance: If H.R. 2 passes the Republican-controlled House, it would go to the Democrat-controlled U.S. Senate, where a yes vote is questionable. But if it does reach the desk of the president, the White House has said that President Obama will veto it. Still, the fact that the bill is in motion will continue the lingering uncertainty for individuals and businesses, about what to expect in health care.

Friday, Jan. 21: The SEC will submit a high-interest report to Congress that includes analysis on whether the fiduciary standard of care (put the client first) should apply to broker/dealers when providing investment advice. B/Ds currently operate under the suitability standard (recommend the most suitable product for the need). Investment advisers already operate under the fiduciary standard.

Importance: Insurance organizations have been advocating for the suitability standard and against the fiduciary standard, which they say would fundamentally change how insurance is sold. The National Association of Insurance and Financial Advisors (NAIFA) says that many members it surveyed recently are concerned that the legal implications of a fiduciary standard would increase compliance costs, causing many members to curtail services to mid-market customers in favor of affluent clients, stop offering securities or try increasing client fees. Therefore, if the SEC report calls for a universal fiduciary standard, certain insurance interests will likely object strenuously.

Also on FridayPublic companies, including public insurance companies, are now subject to the “say on pay” and “golden parachute” provisions of Dodd-Frank. Also, the SEC is to submit another report on how to improve investor access to registration information on investment advisers and brokers.

Tuesday, Jan. 25:President Barak Obama has accepted House Speaker John Boehner’s formal invitation to make the annual State of the Union address today. Some reports are still calling the date tentative, but without explanation.

Importance:  The President is expected to introduce his priorities for the year, including domestic and foreign policy and the economy. Insurance professionals will be listening for any proposals concerning changes in taxation, including tax laws impacting insurance products.

Other developments that may occur this week or next:

·                     The U.S. District Court in Pensacola, Fla., may rule on a motion to allow four more states to join a 20-state lawsuit challenging the constitutionality of the ACA.  Some observers are predicting the court may also rule on the case itself, either this week or in the near future. The court heard arguments on the merits of the case in 2010.

Importance: Once a decision is handed down on this case, many experts believe it will be appealed, ultimately reaching the Supreme Court. The fact that plaintiffs could include as many as 24 states is lending weight to this prediction. The pending nature of the case is keeping uncertainty alive, making health care planning and decision-making difficult for individuals and businesses.

·                     Government Accountability Office (GAO) report: Under Dodd-Frank, the Comptroller General of the United States (through the GAO) is due to submit a January study to Congress on financial planning the use of financial designations. The study is to cover the effectiveness of current regulations in protecting the public from those holding themselves out as financial planners through use of misleading titles, designations and marketing materials. It will also examine the current oversight and regulations for financial planners and any legal or regulatory gaps that may exist in this regulation.

Importance: New requirements could be proposed that will impact financial planners, including insurance advisors that are also planners.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].

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